Year-end market view
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1.
The week finished quietly and flat
as the SPX closed at 1268.66 vs. the previous week’s close of 1267.32, which
also had the rally high of 1275.80. The Dow closed at 10,883,up just seven
points on the week, with the QQQQ, -0.4% to 41.40 and the Nasdaq -3 points to
2249. The SPX range last week was on the narrow side from 1270.57 – 1257.21 The
year-end move which started on 10/13 at SPX 1168.20, ran +9.2% to 1275.80 and
remains up +8.6% and +4.7% year to date. Nothing has changed since the 12/21
commentary, which stated that this week’s close will be higher than the 12/20,
1259.62 close. That is why the SPX short-term long proxy position was
taken because of the mark-up “Game” being played and nothing more cerebral about
it. The game this year takes precedence over the negative divergences in
momentum, breadth and options sentiment. It won’t take much more than a
few buy programs to break out (upside) the one-month-old SPX range of 1275.80 –
1249.39 (see chart).
New Dow highs above 10,960 are just 77 points and then 117
points to keep the media babbling above 11,000.
In response to the question about the most recent QQQQ series numbers in play, they are: 41.88, 42.05 (high
rally close 42.10), 42.95 and then 43.69. The initial starting price is 37.33
(10/13 low), the last significant low. Projected from the 10/02 19.76 low, they
are 41.54 and 43.17.
The scorecard coming into the last week of 2005 has the XLE
+41.1% (last 3 months, -4.2%), XLU +14.3% (-3.4%), XLV, +7% (+2.08%), XLF, +5.4%
(+10.2%), SPX, +4.7% (+4.4%). The bottom two sector SPDRs are the XLK, +1.3%
(+4.1%) and XLY, -6.3% (+4.5%). It’s been a commodity year for sure. The
leading commodity gainers on the year are crude oil (West Texas), +33.7%, copper
(cash spot) +49.6%, palladium, 32.3%, gold
(
HUI |
Quote |
Chart |
News |
PowerRating) +25.8%, silver, +25.7% and
then the U.S. dollar even beat the SPX at +12.4% (commodity source,
www.thechartstore.com).
The basics and energy are late bull-cycle sectors and the XLB
is right in the kill zone after breaking the long-term trendline from 10/02,
which followed the 32 high (+102%). The initial trendline break was t0 25.93
vs. the 15.86 10/02 low and this was just below the .382 retracement to 15.86,
which is 26.22. The XLB closed at 30.52 vs. the kill zone high of 30.70 (.786).
The 32 high was made in 02/05. This is a good technical spot for short entries,
provided there is a change in direction of price, which is always a
pre-requisite for action at any anticipated level. If it trades through this
zone with strength into early January then it will become a 1,2,3 higher top,
which would dictate a different short entry. The kill zone is always a red alert
after a stock has broken a longer-term trendline. The risk is minimal because
entry is at the lowest common denominator with stops in this case above 30.70
(see chart).
The last four days of December and the first two days of
January get lots of obvious publicity, but avoid any assumptions and only take
the day trades that are clearly defined.
Have a good trading day and have a great week.,
Kevin Haggerty
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